In the world of Britannia, there are numerous musical instruments made to entertain people. Following is a list and sound examples of the various instruments:
Lute[]
The favourite musical instrument of many bards is the lute. The music is generated by pulling the strings right, causing the wooden body of the instrument to generate the right vibrations. The sound from this instrument is gentle and perfect for a song before going to sleep.
Iolo is carrying a lute in Ultima VI and Ultima VII Part Two. In the latter game, a song on a lute by Iolo also gained the party an invitation to Lady Yelinda.
Listen to the lute in its original MIDI version here: 
Xylophone[]
The Xylophone consists of numerous bars either made of wood or metal, that are fixed on a frame. Hitting these carefully carved bars with the fitting sticks will cause the sounds to appear. The trick is, to hit the bars in the right speed and without hitting the wrong one.
The goblins of the Serpent Isle have perverted the idea, by building a xylophone made of human bones.
Listen to the xylophone in its original MIDI version here:
Harp[]
The harp is a large string-instrument. It is the pulling of the strings that results in the sounds that form the music. The sound of the harp is relaxing and easy on the ears.
In Ultima VI, the Avatar had to move the harp of the stranded pirate Bonn in order to get his piece of a treasure map.
Listen to the harp in its original MIDI version here:
Harpsichord[]
The harpsichord is a large musical instrument. The player presses the numerous keys on the front, in order to activate small picks inside that pluck the strings, whose vibrations are amplified by the wooden body of the harpsichord.
In Ultima V, the Avatar had to play Lord British's harpsichord in order to get the Sandalwood Box. The same thing had to be done in Ultima IX to receive an Ankh.
For more fun with this instrument, see Harpsichord Tile Shifting.
Listen to the harpsichord in its original MIDI version here:
Panpipes[]
Panpipes are a small instrument held against the lips and blown into. The various individual pipes are arranged according to their chromatic pitch, from which melodies can be produced by skillful breathing.
In Ultima VI, the Avatar had to play "Stones" to Selganor on a set of panpipes in order to receive the Rune of Sacrifice. In this case, the instrument was required to be custom-made from a freshly cut yew log purchased from Ben, which was subsequently sawed by Aaron and finally crafted into the pipes themselves by Julia.
Listen to the panpipes in their original MIDI version here:
Lyre[]
The lyre is a small string instrument. Its sound is very similar to that of the harp, only higher. Essentially, it is a miniature harp for mobile usage.
(The sound is the same as the harp)
Musicbox[]
Not an instrument, but the music box nonetheless creates music. These little boxes have a mechanism that plays a pre-defined music. Only one is found, in Skara Brae. The sound of the music box is very faint and resembles a symphony of small bells.
Listen to the musicbox in its original MIDI version here: